(Alliance News) - Ofgem will not slash the money that UK energy networks can give to their shareholders by as much as first indicated, after an initial plan to halve returns met resistance from the companies themselves.
The UK energy regulator said on Tuesday it will allow network companies to pay a return on equity of 4.3% to their investors between 2021 and 2026, down from high returns of between 7% and 8% that are currently allowed.
The decision, which is Ofgem's final say on the matter, is slightly higher than the 3.95% that energy networks were told they could be facing in Ofgem's preliminary decision in July.
The decision, taken with other measures that Ofgem has proposed, will save customers about GBP10 per year on their energy bills. It includes billions of pounds for green investments.
National Grid and SSE both welcomed the Ofgem announcement, saying they would review the final determination in detail before deciding whether to appeal. National Grid shares were up 2.0% early Tuesday, while SSE's were up 2.2%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.2% at 6,539.51
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Hang Seng: down 0.8% at 26,304.56
Nikkei 225: closed down 0.3% at 26,467.08
DJIA: closed down 148.47 points, or 0.5%, at 30,069.79
S&P 500: closed down 0.2% at 3,691.96
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GBP: unchanged at USD1.3342 (USD1.3346)
EUR: soft at USD1.2112 (USD1.2137)
Gold: unchanged at USD1,865.80 per ounce (USD1,865.82)
Oil (Brent): down at USD48.20 a barrel (USD49.04)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 CET EU gross domestic product
1100 CET Germany ZEW indicator of economic sentiment
0830 EST US revised productivity & costs
1630 EST US API weekly statistical bulletin
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A grandmother has become the first person in the world to receive Pfizer's Covid-19 vaccine as the NHS embarks on a mass vaccination programme. Margaret Keenan, 90, received the jab at 6.31am in Coventry on Tuesday, marking the start of a phased rollout of the vaccine to older people, NHS staff and care home workers. Jabs will be administered at dozens of hospital hubs across the country from Tuesday – dubbed "V-Day" by UK Health Secretary Matt Hancock. Keenan, known to family and friends as Maggie, received the jab from nurse May Parsons at University Hospitals Coventry and Warwickshire NHS Trust.
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Retail sales growth in the UK was hindered by virus restrictions in November, the British Retail Consortium-KPMG retail sales monitor showed. Sales increased by 0.9% year-on-year in November, well below the three-month average of 3.9% and October's 4.9% increase. However, this was still above the twelve-month average of a 0.3% decline and a fall of 0.9% for November 2019. Online non-food retail sales surged 47% in November, accelerating from 39% growth in October. Last month, England was placed into a second national lockdown with non-essential retail ordered to close, along with places such as pubs, restaurants and cafes. UK retail sales increased 7.7% on a like-for-like basis - excluding temporarily closed stores but including online sales - after a 1.3% fall in November 2019.
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Japan's prime minister unveiled more than USD700 billion in fresh stimulus to fund projects from anti-coronavirus measures to green tech, the country's third such package this financial year. The coronavirus pandemic has wrought global economic carnage and countries across the world have announced massive cash injections. Premier Yoshihide Suga said the latest package, worth JPY73.6 trillion, about USD708 billion – including loan schemes and actual government spending of around JPY40 trillion – would be formally approved later Tuesday. It is the first stimulus spending Suga has announced since taking office in September, and comes as Japan faces a spike in Covid-19 infections, with record numbers of new cases reported in recent weeks.
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BROKER RATING CHANGES
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JEFFERIES RAISES WHITBREAD TO 'BUY' ('HOLD') - TARGET 4,010 (2,200) PENCE
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JEFFERIES CUTS IHG TO 'UNDERPERFORM' ('HOLD') TARGET 3,550(4,100) PENCE
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JEFFERIES CUTS ON THE BEACH GROUP TO 'UNDERPERFORM' ('HOLD') - TARGET 310 (330) PENCE
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JEFFERIES CUTS WILLIAM HILL TO 'HOLD' ('BUY') - TARGET 272 (330) PENCE
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COMPANIES - FTSE 100
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Ashtead Group's interim earnings were dealt a blow by the coronavirus crisis, but the equipment rentals firm expressed confidence for the year ahead. Ashtead Group kept its interim dividend unchanged as earnings took a hit from the coronavirus pandemic. For the half-year ended October 31, revenue was down 3% to GBP2.29 billion from GBP2.45 billion last year and pretax profit was 22% lower to GBP506.2 million from GBP660.2 million. Ashtead said the sudden fall in activity levels in March and April due to lockdown measures had a significant effect on profit in the first half as a large proportion of costs are fixed in the short term. It took early decisions not to make any workers redundant as a result of Covid-19 or seek assistance from any government support programmes, as it continued investment in the business. The company generates a bulk of its revenue in the US from its Sunbelt business, where revenue was USD2.75 billion, down 4.9% from USD2.89 billion last year. Ashtead said trading volumes were lower than last year as a result of the pandemic, but its performance has been mitigated, in part, by emergency response efforts throughout the business. Sunbelt Rentals is designated as an essential business in the US, UK and Canada and has supported government and private sector responses to the pandemic. Ashtead maintained its interim dividend at 7.15 pence. It said it expects full-year results to be ahead of its previous expectations.
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Plumbing and heating products supplier Ferguson said it delivered a resilient performance in the first quarter and its expectations for the new financial year remain unchanged. For the three months to October 31, revenue was USD5.37 billion, up 3.1% from USD5.21 billion in the first quarter in financial 2020 and trading profit was up 12% to USD504 million from USD451 million. Ferguson posted first-quarter gross margins of 29.6%, down 0.1 of a percentage point from last year driven by product mix, but it said operating costs continued to be well controlled which led to a good overall trading performance. "Since the start of the second quarter Ferguson has continued to generate low single-digit revenue growth in broadly flat markets although we remain cautious on the outlook for the year as a whole, considering current pandemic trends. Despite these potential headwinds the business is in very good shape and we are well prepared should there be any further market-related disruption and overall management's expectations for financial 2021 are unchanged," said Chief Executive Kevin Murphy.
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COMPANIES - FTSE 250
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Business publishing and events firm Euromoney Institutional Investor said it has acquired predictive marketing analytics WealthEngine for USD14.5 million. The company said the acquisition is expected to enhance the operating profit margin of its People Intelligence business and deliver accelerated growth over the medium-term. As a result, the acquisition is expected to be earnings accretive for Euromoney, it noted. "The acquisition of WealthEngine is a great addition to the group and supports our strategy by adding further scale to our 3.0 People Intelligence business. It brings leading technology, workflow solutions and mustâ€have data, which, when combined with Wealth-X and BoardEx, will enhance significantly the value we provide customers," James Lavell, CEO of People Intelligence said.
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Moody's Investor Services late Monday upgraded its corporate family rating on Cineworld Group, but retained a negative outlook for the cinema chain. Moody's said the upgrade of Cineworld's CFR to Caa2 is based on its improved liquidity position following the new debt issuance. Last month, Cineworld secured "significant additional liquidity", on top of further operational measures which it hopes will deliver "enhanced profitability over the long term". Cineworld agreed the terms of a new USD450 million three-year non-call facility, which matures on May 23, 2024. After accounting for the new debt facility, Cineworld will have aggregate gross debt financing of USD4.9 billion with a weighted average interest rate of approximately 4.5%.
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COMPANIES - GLOBAL
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Chinese Huawei Executive Meng Wanzhou offered no comment Monday on reported plea negotiations in her Canadian court battle against extradition to the US. Asked by AFP if she would take a deal from the US reported by the Wall Street Journal, Meng simply smiled back and rushed past a crush of cameras outside her Vancouver home before taking a black SUV to court. Defense and government lawyers also declined to comment as they headed into the Vancouver courthouse. The businesswoman – whose father is Huawei Founder & Chief Executive Ren Zhengfei – has been in a two-year battle against extradition over charges Huawei violated US sanctions on Iran. Reports of a possible "deferred prosecution agreement" with the US Justice Department had raised hopes that the case could be settled and two Canadians detained in apparent retaliation by Beijing would also be set free. Under the terms, Meng would admit some of the fraud and conspiracy charges related to the alleged violations by Huawei and be allowed to return to China. But she is reluctant to agree on a deal that would see her admit wrongdoing, the Journal said last Thursday, citing unnamed sources.
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Tuesday's Shareholder Meetings
Worsley Investors Ltd - AGM
Gattaca PLC - AGM
Volta Finance Ltd - AGM
Allergy Therapeutics PLC - AGM
Greatland Gold PLC - AGM
Haydale Graphene Industries PLC - AGM
Henderson International Income Trust PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
